This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

The stable return profile of catastrophe bonds and their historically low correlation with broader financial markets have traditionally been the main reasons investors considered an allocation of cat bonds into their portfolio, however, more recently, investors have started recognising catastrophe bonds for their social impact, as per a new report from the Man Group.

According to the firm, a “new breed” of cat bonds has now emerged, aimed at preventing disaster and extending coverage for low-income countries unable to mobilise proper financing to fight a looming disaster.

The UN reportedly defines resilience as the “ability of a system, community or society exposed to hazards to resist, absorb, accommodate to and recover from the effects of a hazard in a timely and efficient manner.”

The Man Group continued, “The cover that catastrophe insurance provides sits firmly within this definition.

“Not only does it compensate for losses, but the use of parametric triggers can mean that payments are made more quickly than if actual losses had to be assessed (particularly in emerging markets where the claims process is generally less well developed).”

Continuing, “Now, cat bonds are also emerging as a socially responsible investment. For the insured risk, cat bonds provide an element of risk transfer back to investors.”

Man Group highlighted named storm cover for Jamaica, earthquake cover for the Turkish Catastrophe Insurance Pool, and the Pacific Alliance cat bonds as examples which illustrate how these insurance-linked securities (ILS) instruments can aid in building risk transfer resources and disaster resilience.

“As a sign of confidence in this asset class, the market capitalisation is growing at an impressive rate.

“New, innovative bonds are emerging as a very effective tool in providing a new kind of social benefit, while helping generate uncorrelated risk-adjusted returns for investors,” the firm’s report concluded.

Environmental, social and governance (ESG) investing remains a key area of focus for the insurance-linked securities (ILS) market and with the asset class ticking many boxes for a socially responsible mandate, investors are increasingly looking to understand the beneficial features of the cat bond instrument.

Cat bonds have emerged as a socially responsible investment: Man Group was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

During the full-year 2023, the catastrophe bond and insurance-linked securities (ILS) team at private markets focused investment manager Schroders Capital allocated over US $817 million to transactions that specifically help in reducing the insurance protection gap.

Schroders Capital has quantified this area of impact that its cat bond and ILS investment management unit has been making for a recent report on the firm’s broader sustainability focus.

While it is clear that catastrophe bonds and insurance-linked securities (ILS), as an alternative mechanism for sourcing reinsurance capital, are inherently providing protection against disaster and enabling the insurance industry to better bear the risks it underwrites, Schroders Capital has categorised transactions it specifically feels are making a difference on helping to cover more uninsured economic losses.

The investment manager sees its capital making a difference, saying that if “managed carefully, can unlock… significant improvement potential for people and planet.”

One area is in driving increased availability of insurance and reinsurance protection, specifically, “through increased climate insurance coverage in emerging markets, private equity or via ILS cat bonds.”

Schroders Capital further explained, “In 2023, only 40% of losses resulting from natural disasters globally were covered by insurance, leaving a value of US$172 billion uninsured.

“Our ILS team works to reduce this protection gap by allocating a percentage of their sustainable investment portfolios to specific transactions designed to increase insurance coverage, providing a sense of security to communities providing rapid relief when a disaster hits, and enhancing overall resilience. Developing and emerging markets are the most vulnerable to the consequences of climate change.”

In addition, Schroders Capital highlighted that between 2014 and 2023, some 85% of economic losses caused by natural disasters in Asia were not covered by insurance.

Highlighting the $125 million Charles River Re Ltd. (Series 2024-1) catastrophe bond, that was sponsored by American European Insurance Company, Schroders Capital explained why this transaction was deemed to contribute to narrowing the insurance protection gap.

“The need for such cover was exemplified with Superstorm Sandy: in such events, risks carriers often face ‘concurrent causation’ and are caught between the homeowners insurance company and the flood insurance company, one arguing that the event was caused by flood, the other one by wind. It is costly and leaves the policyholder uncovered, impacting the reputation of the insurance company and the industry more broadly.

“With this cat bond, the sponsor offered a flood endorsement on each quotation, resulting in a differentiated product with the target being value-oriented mass affluent homeowners,” the asset manager explained.

Despite certain deficiencies when it came to ESG scoring this catastrophe bond, Schroders Capital noted, “The transaction structurally and explicitly addresses the protection gap when it comes to the availability of coastal flood risk which is generally not offered by the insurance market.”

Insurance-linked securities (ILS) is an area that Schroders Capital sees as a focus in its sustainability and impact efforts.

“Our ILS sustainable strategies, including one of the world’s largest cat bond funds, are a good example: they provide a suitable reinsurance alternative for local governments or NGOs against e.g. extreme whether events, reducing insurance protection gap while at the same time delivering competitive financial returns,” the company said.

Schroders Capital has also been one of the ILS managers that have helped to drive greater ESG transparency through the catastrophe bond and broader ILS marketplace.

The investment manager was a founding member of the ILS ESG Transparency Initiative, which was formed as an insurance-linked securities (ILS) industry group focused on enhancing environmental, social and governance (ESG) transparency in the ILS market.

Schroders Capital believes that effort has made a significant contribution so far, highlighting that ESG disclosure has increased in the marketplace.

The company said that its internal data suggests “that 77% of ILS cat bond transactions have made ESG questionnaires available deals in Q4 2023,” which is a significant increase.

Georg Wunderlin, CEO, Schroders Capital, commented, “Sustainability is more critical than ever to deliver long-term competitive returns. It is simply a once in a generation business opportunity.

“Our ambition is to build a new type of private markets firm, one which is anchored in sustainability and delivers the superior performance and real-world difference our clients expect from us.”

ESG investing, sustainability and opportunities they present, remain an area of focus for the insurance-linked securities (ILS) market. Read more of our insights on this topic here.

Schroders Capital invested $817m+ in ILS that help reduce protection gap in 2023 was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Italian and global insurance giant Assicurazioni Generali S.p.A. has revised its framework for green catastrophe bonds to incorporate updates and expand its scope, now publishing a Green, Social and Sustainability Insurance-linked Securities Framework in its place.

Generali was early to recognise the potential for insurance and reinsurance linked investments to have green, or environmental, social and governance (ESG) credentials.

Because of the insurers focus on this, Generali launched its own framework for Green insurance-linked securities (ILS) back in 2020.

That framework defined how Generali could use the freed-up capital benefit achieved through its sponsorship of an ILS or catastrophe bond transaction for Green asset investments.

At its core, that meant an amount equivalent to the capital relief benefit achieved through issuance of a Green ILS or cat bond transaction could be exclusively used to allocate capital to, or refinance, green initiatives, projects or assets, under Generali’s framework.

The insurer sponsored its first green catastrophe bond issuance in 2021, the €200 million Lion III Re DAC transaction.

Those €200 million of cat bond notes provided Generali with reinsurance protection against certain losses from European windstorms and Italian earthquakes across a multi-year term.

As we later reported, Generali said that, in the case of the Lion III Re catastrophe bond, it freed up €28.1 million of capital for the insurer, under regulatory capital relief calculated on the basis of its Solvency Capital Requirement at the inception of the cat bond risk period.

That freed up capital was allocated to a sustainable investment deemed to make a positive environmental impact, in this specific case it refinancing a green asset that Generali already had interest in, the Tour Saint-Gobain in Paris, a building project that asset management unit Generali Real Estate was behind, and that on completion achieved the highest marks possible for four international environmental certifications.

It was found that the €28.1 million of capital, freed up due to the issuance of the Lion III Re catastrophe bond, had served to avoid 35.1 tCO2e of greenhouse gas emissions, after an audited impact evaluation undertaken by a third-party specialist.

Now, Generali has revisited the green ILS framework and updated it to become the Generali Green, Social and Sustainability Insurance-linked Securities Framework.

The insurer said that the company “recognises the crucial role the financial industry must play in the transition to a low carbon economy and strives to have an active role in the further development of a sustainable financial market.”

To enhance its ability to address environmental and sustainability issues, where Generali can affect positive change, the new framework has been developed under which the insurer can issue sustainable ILS instruments.

The company further explained, “This Green, Social and Sustainability ILS Framework represents Generali’s latest efforts to align its program with best practice, promote SRI principles, and enhance its ability to support stakeholders in realising their green and social objectives. We see the issuance of Green, Social and Sustainability (‘GSS’) labelled ILS as an effective tool to make a positive contribution to the climate and/or the society, while achieving the Sustainable Development Goals of the United Nations (‘UN SDGs’).

“Through GSS ILS, we aim to further diversify our investor base, focusing on socially responsible and highly dedicated sustainable investors and by strengthening the relationship with the existing investor base.”

As the company has taken important steps to enhance its green strategy since the publication of the first Green ILS Framework, Generali says it has now expanded it further, launching the new framework to align with its Green, Social and Sustainability Bond Framework that was published in December 2023.

Now, under the new Green, Social and Sustainability ILS Framework, Generali can categorise different types of sustainable ILS, including:

• Green ILS, to finance and/or refinance Eligible Green Assets.
• Social ILS, to finance and/or refinance Eligible Social Assets.
• Sustainability ILS, to finance and/or refinance a mix of Eligible Green Assets and Eligible Social Assets.

So as to maximise the impact of the new framework and its contribution to a sustainable financial market, Generali said that it is designed “to reflect the structure of an ILS transaction, which allows the allocation funds to Green, Social and Sustainability initiatives following two different approaches.”

This is, through the use of the freed-up capital benefit, as in the previous case with Lion III Re, and also by use of the proceeds segregated in the SPV in a portfolio of Green and Social investments.

By expanding the scope of its framework for green, social and sustainable cat bonds and ILS, Generali is also aligning with the needs of many investors, that continue to have a strong focus on ESG appropriate assets.

Generali has commissioned Sustainalytics to conduct an external review of the new Green, Social and Sustainability ILS Framework.

Giving its opinion, that company explained, “Sustainalytics is of the opinion that the Generali Green, Social and Sustainability Insurance-linked Securities Framework is credible, impactful and will deliver overall positive environmental and social impacts. Sustainalytics is further of the opinion that the principles of impact and transparency that underlie the responsible investment industry, as well as many of its norms and standards, are applicable to the green, social and sustainable insurance-linked securities (ILS) instruments to be issued under the Framework.

“Sustainalytics is of the opinion that the Generali Green, Social and Sustainability Insurance-linked Securities Framework is impactful, transparent and in alignment with core market expectations.”

Generali’s first green catastrophe bond, the Lion III Re DAC transaction, remains in-force through to June 2025.

With this new framework in place, it will be interesting to see what green, social or sustainability features the insurer incorporates into its next cat bond deal.

Read our stories about ESG investment in catastrophe bonds and insurance-linked securities (ILS).

Generali updates insurance-linked securities framework to “green, social & sustainable” was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Banque Bonhôte & Cie, a Swiss private bank, investment firm and wealth manager, has announced the launch of a new environmental, social and governance (ESG) focused fund strategy that will incorporate catastrophe bonds as one of its allocations.

Pierre-François Donzé, Head of Asset Management at Banque Bonhôte, said that, “Our approach and the integration of ESG criteria, is based on a quantitative allocation methodology to identify appropriate investment opportunities in the entire spectrum of the fixed income bond universe.”

The newly launched Bonhôte Selection Global Bonds ESG fund strategy does not follow a benchmark, instead leveraging quantitative methods to identify assets to invest in from the fixed income universe, based on indicators that define the attractiveness of one type of bond, over another.

These can range from the majority of the global fixed income universe, including sovereign bonds, investment-grade and high-yield corporate bonds.

But in addition catastrophe bonds are a specific asset class that will be targeted for this ESG focused investment fund strategy, the private bank explained.

The private bank notes that, catastrophe bonds, “Offer an advantageous risk/reward and provide useful diversification through a performance that is largely uncorrelated with conventional financial markets.”

Explaining that, “CAT bonds, which are part of the insurance-linked securities (ILS) category, are used by insurers and reinsurers to transfer the risks of predefined events to investors.”

The strategy has been optimised for investors whose reference currency is the Swiss franc and takes into account the cost of currency hedging as well.

The use of ESG criteria to identify opportunities is “a fundamental part of our investment strategy,” Banque Bonhôte & Cie said.

“The fund promotes environmental or social features, or a mix of the two, by investing in the vehicles and securities of issuers with an ESG profile above the median of their peers. Many controversial business activities and sectors are automatically excluded,” the company further explained.

Catastrophe bonds can be up to a maximum of 20% of the ESG investment fund strategy

Julien Stähli, Director of Investments, stated “This new fund gives pride of place to ESG criteria and marks a further step in our long-standing commitment to responsible investment and quantitative approaches.”

Donzé also said the approach taken, “Makes it possible to add value compared to strategies limited to a single market segment. The indicators used estimate the relative attractiveness of the various segments of the bond market on a historical basis.”

He also said that the Global Bonds ESG fund portfolio will be “dynamically rebalanced” when the indicators used suggest this is necessary.

It’s clear that Banque Bonhôte & Cie recognises the investment qualities of catastrophe bonds and the diversifying benefits they can deliver to portfolios, as well as the inherent ESG qualities given their role in the provision of critical disaster risk financing to support the global insurance and reinsurance industry.

As we previously reported, Banque Bonhôte & Cie had said before that catastrophe bonds, as an asset class, exhibits the rare property of price moves that are independent of broader financial markets and so can be considered “the only true source of diversification.”

Banque Bonhôte launches ESG fund strategy incorporating catastrophe bonds was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Tokio Marine Holdings, Inc., through its subsidiary Tokio Marine & Nichido Fire Insurance Co. Ltd., has become the first Japanese insurer to make use of a SOFR-based World Bank Sustainable Development Bond as a permitted investment within its latest catastrophe bond issuance, the company highlighted today.

As Artemis has been reporting, Tokio Marine has been in the market since February and has now secured its targeted $100 million Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond recently, with the reinsurance coverage from the transaction priced at the low-end of initial guidance.

Now, the Japanese insurer has highlighted its use of the proceeds of the catastrophe bond issuance to purchase a sustainable development bond, saying that using this “as collateral for the Kizuna Re III cat bond is supporting the achievement of sustainable development goals and contributing to the realization of a sustainable society.”

Use of proceeds of cat bond issues to invest into financing for sustainable development helps sponsors align their catastrophe bond issues with their own environmental, social and governance (ESG) agendas, while also making the investment more appealing to investors with an ESG focus or mandate.

Tokio Marine used the proceeds of the Kizuna Re III 2024-1 catastrophe bond, that provides it with earthquake reinsurance and was issued out of Singapore, to purchase a SOFR-based Sustainable Development Bond issued by the World Bank Group’s International Bank for Reconstruction and Development (IBRD).

The company said that, through its sustainability strategy, it aims to “solve social issues through business activities and contribute to the realizations of a sustainable society” as a medium- to long-term growth engine and is accelerating its efforts to take climate action, improve disaster resilience, and protect the natural environment.”

The company said that, as part of its goal to improve disaster resilience in what is one of the most disaster-prone countries in the world, Tokio Marine has been a regular user of catastrophe bonds, alongside purchasing traditional reinsurance capacity.

“As a part of these strategies, besides sponsoring the issuance of the Kizuna Re III cat bond, TMNF has elected to invest the proceeds from the sale of the Kizuna Re III cat bond in a SDB issued by IBRD (rather than money-market funds), which is the first example of a Japanese insurer doing so since IBRD notes transitioned from LIBOR to SOFR,” the company explained.

Adding that, “The principal amount of this catastrophe bond raised from qualified institutional investors will be invested in a SDB issued by IBRD under its Global Debt Issuance Facility. The net proceeds of the SDB will be used by IBRD to fund projects, programs, and activities in IBRD’s member countries designed to achieve positive social and environmental impacts and outcomes.”

It’s encouraging to see the use of sustainable development bonds as collateral investments in the catastrophe bond market expanding further beyond just the World Bank, to private insurance sector cat bond sponsors.

The World Bank itself was the first to do so this, since when insurance giant Assicurazioni Generali S.p.A. developed its framework for Green insurance-linked securities (ILS) which saw the proceeds of one of its catastrophe bonds used to refinance a green asset in an effort to help avoid greenhouse gas emissions.

But, Tokio Marine is the first private insurance or reinsurance market sponsor of a catastrophe bond to use a puttable SOFR linked Sustainable Development Bond from the IBRD, which marks an efficient way to structure a cat bond with collateral that can be put to work in supporting sustainable or ESG driven goals.

As a reminder, Gallagher Securities, the insurance-linked securities (ILS) specialist arm of reinsurance broker Gallagher Re was the sole structuring agent for this new cat bond for Tokio Marine, so will have been instrumental in incorporating the sustainable development bond as permitted investments for the collateral, within the overall cat bond structure for this issuance.

You can read all about this new Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond transaction and every other Tokio Marine sponsored cat bond in our Artemis Deal Directory.

Tokio Marine is first Japanese cat bond sponsor to use sustainable development bond was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

The Bermuda Monetary Authority (BMA) has laid out its plans for 2024, with Chief Executive Officer (CEO) Craig Swan highlighting specific opportunities in parametric risk transfer for climate insurance.

The 2024 business plan of Bermuda’s financial regulator contains a focus on “initiatives and projects to achieve positive outcomes and strengthen Bermuda’s regulatory framework for the upcoming year.”

Of relevance to the insurance, reinsurance and insurance-linked securities (ILS) community, the Bermuda Monetary Authority (BMA) expects to continue to work on enhancing its regulatory and supervisory regimes to meet the evolving needs of financial service companies today.

There will be further work on the Insurance Code of Conduct, “to uphold the importance of financial transparency, consumer protection and education initiatives,” the BMA explains.

While an Environmental, Social and Governance (ESG) model and a Sustainability Strategy are also key initiatives and here there are relevant items to look out for, for this industry.

BMA CEO Craig Swan said, “The Authority’s strategy is underpinned by deep expertise and cross-functional viewpoints designed to champion innovation. This plan’s many thoughtfully curated objectives will optimise excellence while simultaneously preparing the organisation to meet and address emerging challenges that impact the regulatory environment. In a continually fluctuating business climate, this approach enables the BMA to open new pathways for enhancing our abilities and innovative practices today and for many years to come.”

Swan also commented, “The pace of innovation is challenging organisations to remain agile and adapt how they work to meet the ebb and flow of their markets. From artificial intelligence and automation to decentralised finance and insurance-linked securities, the financial services industry has evolved markedly over the last few decades with increasingly transformative leaps forward each successive year.

“As firms confront issues such as inflationary pressures, relentless consumer demands, volatility in the commodity markets and extreme climate patterns, they are building systems to redefine and reimagine their future aspirations.”

The BMA intends to explore working with investment funds to “set up a new framework that facilitates the ability to designate certain Bermuda funds as ESG compliant,” Swan said.

This could be an interesting initiative for ILS managers, given there are plenty of ILS fund structures domiciled in Bermuda that could find an ESG framework appealing to look into.

The BMA also intends to prepare a consultation paper on a new climate risk disclosure framework for Bermuda commercial (re)insurers, Swan also explained.

But, perhaps most compelling in the current environment and in terms of opportunity, the BMA also intends to work in 2024 on “reviewing and, where applicable, updating other (re)insurance frameworks to better facilitate parametric climate-related insurance products.”

Bermuda has always considered itself as the world’s climate risk capital market and given the proliferation of catastrophe, weather and climate focused underwriting expertise in the islands insurers, reinsurers and of course ILS fund managers, there is clearly a wealth of experience and relevant knowledge, as well as ongoing business there.

If Bermuda can make its regulatory and supervisory regime even more relevant to underwriters of parametric climate risk insurance and reinsurance opportunities, while also finding ways to tap into the ILS market expertise on the island, the opportunity to attract and deploy climate risk capital out of the market there seems a worthwhile achievable goal.

The BMA has always followed a forward-thinking agenda and this year’s business plan again highlights the regulators’ ability to focus on emerging trends that can be drivers of future profit for Bermuda’s financial market and its participants.

Bermuda’s BMA aims to better facilitate parametric climate-related re/insurance was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

The capital raise for the 2024 underwriting year for London headquartered specialty insurance and reinsurance firm Beazley’s third-party capital backed Smart Tracker syndicate 5623 was “heavily oversubscribed” and the structure remains on-track to deliver a fourth consecutive year of underwriting profits to backers.

This is according to Will Roscoe, Head of Portfolio Underwriting at Beazley, and the Active Underwriter for the firm’s Smart Tracker Syndicate 5623 and its ESG Syndicate 4321.

Roscoe was reflecting on a strong 2023 for the Beazley Portfolio Underwriting team he runs and looking ahead to 2024 in a post on Linkedin.

He explained that, “The Beazley Smart Tracker syndicate 5623 has delivered its 2023 business plan having underwritten $425m Gross Written Premium.”

Further stating that, “We are on track to return a fourth straight underwriting profit to our investors when we announce our 2021 year of account result next year.”

The third-party capital backed Smart Tracker is one of Beazley’s underwriting structures at Lloyd’s that attracts a diverse range of institutional investor capital.

It is considered akin to an insurance-linked strategy, attracting some well-known pension investors that allocate to insurance-linked securities (ILS).

The Smart Tracker both augments Beazley’s underwriting capacity in the market, while also enabling it to earn fee-like income and offer low-cost risk capital to clients.

The newer ESG Syndicate 4321 is also popular with third-party capital and delivers similar benefits to Beazley, while also providing a home for underwriting capital that targets ESG aligned opportunities.

Roscoe highlighted the demand from investors for the strategies, saying, “Our capital raise for the 2024 underwriting year of account was heavily oversubscribed, reflecting the strong demand we have seen from our third-party capital investors.”

He also highlighted that his team has launched additional underwriting facilities, saying, “We are proud to be leading the London market’s Smart Follow underwriting strategy.”

Beazley has ambitions to continue growing out the Smart Tracker and related facilities.

Roscoe said, “Looking ahead to 2024 we are poised to deliver further growth, with an ambitious plan to underwrite $525m in premium, taking advantage of continued excellent market conditions.”

The Smart Tracker has proved a popular structure for investors looking to participate in the returns of the Lloyd’s market, as it follows a curated approach to tracking and following the performance of some of the best underwriters.

Beazley Smart Tracker capital raise “heavily oversubscribed” for 2024: Roscoe was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Craig Hupper, an executive from global reinsurance company TransRe who is well-known and liked in the insurance-linked securities (ILS) community, is set to retire from the firm at the end of this year, Artemis has learned.

Craig Hupper is a Senior Vice President at TransRe and currently holds the title of Managing Director, Head of Sustainability and Resilience.

But, through much of his career at the reinsurance company he has developed and led TransRe’s third-party capital and ILS offerings.

Hupper already had insurance and reinsurance market experience, gained on the broking side of the market, when he joined TransRe back in 1998.

At first Hupper was a VP of non-traditional underwriting and the Head of Retrocession for the reinsurer, after which he became an SVP and the Director of Risk Management, before moving over to dedicate his time to further developing third-party capital initiatives at TransRe in 2013.

Hupper has been instrumental in the build-out of the third-party capital and insurance-linked securities (ILS) offering at TransRe, as well as in the development of investor relationships.

His work at the company included, leading on the launch of TransRe’s long-established collateralized reinsurance sidecar vehicle, Pangaea, as well as other initiatives that connected institutional investor capital with reinsurance risk (private ILS arrangements) and also the launch of TransRe’s Bowline Re catastrophe bond program.

Hupper then shifted roles at TransRe in 2021, taking on a new position leading Environmental, Social & Governance (ESG) at the reinsurance firm.

Mike Torre, who had joined TransRe from broker Aon around five years ago, took over the lead at TransRe Capital Partners, managing the reinsurers third-party capital initiatives and relationships that year, as Hupper’s full-time focus moved to the new role.

Torre continues in that Capital Partners lead role today, supporting TransRe’s existing and future partnerships with alternative capital providers.

With Hupper now set to retire from TransRe at the end of this year, the company had already promoted existing employee Brett Denyer to become Head of Sustainability and Resilience earlier this year.

Denyer had already been a key member of TransRe’s Task Force on ESG for a number of years, and has also helped the reinsurer in further integrating ESG considerations into underwriting processes and decision-making.

While Hupper is now departing TransRe after his roughly 26 years of service, he intends to remain connected to the insurance-linked securities (ILS) market and be involved in selected reinsurance, ILS and sustainability focused ventures, following some time off early in 2024.

Hupper spoke at our New York conference back in 2022, participating in a panel session focused on ESG in ILS, which you can still watch here.

TransRe’s Craig Hupper to retire from company at year-end was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

While the insurance-linked securities (ILS) sector has strengthened its governance practices considerably in recent years, when it comes to environmental, social and governance (ESG) considerations, ILS manager selection really matters, as there is variation in how ESG has been adopted and practices are followed, according to Frontier Advisors.

Frontier Advisors is an Australian independent investment consultant with experience advising regional institutional investors that allocate to the insurance-linked securities (ILS) asset class.

In a recent paper, Isabella Milazzo, a Consultant in the Alternatives Research Team at Frontier Advisors, explained that for end-investors, ESG remains an important consideration when allocating to the insurance-linked securities (ILS) asset class.

She explained that ESG is increasingly being incorporated into the ILS market, saying that consideration of ESG issues is deemed to be “critical for the development of the ILS market and for insurance and reinsurance markets more broadly.”

As a result, “ILS managers are increasingly focused on improving ESG practices throughout the entire investment process,” Milazzo said.

But she also noted that, “Manager selection matters when considering ESG factors,” saying that, “Frontier has observed many instances in recent periods where ILS managers will deem contracts uninvestable on the basis that counterparties do not meet ESG criteria.

“However, there is variation with how stringent managers are with this process.”

Milazzo went on to explain that, for the ILS manager community, “environmental and climate change risk is of high importance.”

As a result, a significant amount of time and resource is put into understanding climate risk, the influence it has on specific perils and the effect it can have on ILS investments, Milazzo said.

She also highlighted that, as ILS investments are used to support resilience against natural disasters, this aligns with environmental sustainability goals.

On the social side, Milazzo noted that ILS investments also “inherently provide positive social impact in that they support the efficient functioning of the insurance market.”

ILS is one of the contributing sources of funding when natural disasters occur, helping in the rebuilding and recovery of affected communities.

Finally, Milazzo also highlighted that ILS managers own governance practices “have become increasingly robust over recent years.”

In fact, “It is typical for managers to conduct deep assessments of governance factors associated with all parties involved in ILS investments,” Milazzo explained.

Because of this, the ILS asset class is continuing improving and increasing the incorporation of ESG issues into its processes and ILS manager decision-making.

But, with ESG practices and their adoption not a level playing-field in the industry, it is important that investors do their own diligence on ILS managers, if ESG is one of their core investment tenets.

Recall that, the ILS ESG Transparency Initiative is a global insurance-linked securities (ILS) industry group of investment managers focused on enhancing environmental, social and governance (ESG) transparency in the ILS market.

When it comes to ESG, ILS manager selection matters: Frontier Advisors was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Tenax Capital, the London based hedge fund investment manager that operates a catastrophe bond strategy, has joined the insurance-linked securities (ILS) industry working-group that focuses on enhancing environmental, social and governance (ESG) transparency in the ILS market.

Tenax Capital joined the ILS ESG Transparency Initiative and noted its commitment to incorporating ESG considerations into its investment processes.

As we reported recently, the formation of the ILS ESG Transparency Initiative came about as what was a Swiss-based working group of ILS managers focused on ESG transparency welcomed its first international members.

The Switzerland-based insurance-linked securities (ILS) investment fund managers created the working group to develop a data transparency proposal to advance environmental, social and governance (ESG) in the ILS market, with the initiative informally known as the Zurich ILS Working Group.

The founding members were, Credit Suisse Insurance-Linked Strategies; LGT ILS Partners; Plenum Investments; Schroders Capital ILS; Solidum Partners; and Twelve Capital.

The expansion and renaming to the ILS ESG Transparency Initiative saw the following new members joining: AXA Investment Managers; Leadenhall Capital Partners; SCOR Investment Partners; Securis Investment Partners; and Tangency Capital.

Now, Tenax Capital can also be added to that list.

Tenax Capital noted that the ILS ESG Transparency Initiative currently counts some of the largest and most respected ILS managers as members.

“The primary scope of the initiative is to improve and standardise the ESG disclosure and data related to ILS transactions, in an effort to enhance transparency with respect to covered risks and ultimate beneficiaries of coverage,” Tenax Capital said.

Adding that, “At Tenax we are committed to make ESG considerations a key driver of our investment management process, and we actively work to raise awareness of ESG within our investor community and the broader markets.”

ESG investing and the opportunities it presents remain an area of focus for the insurance-linked securities (ILS) market. Read more of our insights on this topic here.

Tenax Capital joins ILS ESG Transparency Initiative working group was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.